Oct 15, 2018

Axios Generate

Good morning!

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My latest Harder Line column is another installment of my glossary columns. This one, about carbon taxes, is quite timely given the increased focus on the policy lately. I'll share that and then Ben will get you up to speed on the rest of the news.

1 big thing: Dicey carbon-tax semantics

Illustration: Rebecca Zisser/Axios

Two parallel efforts to tax carbon emissions are taking great strides to avoid the t-word.

Why it matters: Because words matter! And this one — tax — matters more than most. It’s at the intersection of our fossil-fuel dependence, the climate-change repercussions of that, and what (if anything) is done about it.

Driving the news:

  • Proponents of an initiative on Washington state’s ballot this November that puts a price on carbon emissions call it a fee, and back it up by citing state law, which defines the difference between taxes and fees. A similar ballot initiative two years ago was officially called a tax — and that's one of the reasons it failed, according to people involved at the time.
  • Backers of a separate push to get a carbon tax passed at the federal level have recently shifted their language to use the word "fee" instead of "tax." That lobbying effort just received a million-dollar backing by ExxonMobil.

The big picture: Taxes of any kind have always been unpopular with voters, and climate change is the most polarized issue in America, according to a recent Pew Research Center poll.

  • A carbon tax received the lowest level of support among respondents in a March Gallup poll compared to other ways to address climate change. Republicans were least likely to support it at 30%, whereas Democrats were more in favor at 71%.

The reason carbon taxes keep coming up is because, economically speaking, they make sense and are essential to addressing climate change. They’re the simplest way to put a monetary value on the environmental impact of fossil fuels.

Between the lines: Technical differences often — but not always — differentiate fees from taxes. Money raised from fees goes to specific purposes, whereas taxes are often funneled into a general budget fund. A high-profile exception to this rule is the federal gasoline tax, which goes to the highway trust fund and yet is still called a tax.

  • This technical difference is what's driving the language in both the Washington state and Washington, D.C. carbon tax fee efforts.
  • “Fee goes over just a heck of a lot better,” said one person involved in the federal carbon tax fee push who spoke candidly on the subject only on the condition of anonymity. “What we’re finding from Republican offices is they like the concept. They don’t like the word tax.”

Economists worry the name game could backfire.

“Other terms may poll better, and if changing the name helps pass a bill, that’s fine with me,” said Adele Morris, an economist at the Brookings Institution with prior stints in the Treasury Department and Congress. “I do worry there’s a downside risk that proponents of another label will be accused of obfuscating the policy’s true tax-like nature.”

Go deeper, with the rest on the Axios stream here, and my other glossary columns:

2. Oil market weighs U.S.-Saudi rift

Crude oil prices are up Monday after the weekend's escalating rhetoric between the U.S. and Saudi Arabia over the disappearance — and apparent killing — of Jamal Khashoggi.

Between the lines: Traders don't appear convinced at this point that the rupture will cause major upheaval in oil flows. Prices for the benchmark Brent crude are higher but they're not soaring.

  • As we sent this newsletter, prices were up 44 cents for WTI and 81 cents for Brent.

Why it matters: Saudi Arabia is the world's largest crude oil exporter and, along with the U.S. and Russia, one of the world's biggest producers. Any Saudi effort to use oil as a geopolitical weapon would rattle global oil markets and put sharp upward pressure on prices that are already near four-year-highs.

Driving the news: Over the weekend President Trump said there would be "severe punishment" if the Saudis killed Khashoggi.

  • In response, the Saudi's released a statement warning, "if it receives any action, it will respond with greater action, and that the Kingdom's economy has an influential and vital role in the global economy."
  • And on Sunday, the general manager of Saudi-owned Al Arabiya News Channel, Turki Aldakhil, published a column warning that U.S. sanctions could send oil prices to $100 per barrel, $200 or even higher.

The latest: In remarks in India this morning, Saudi energy minister Khalid al-Falih emphasized the kingdom's role as a reliable global supplier.

  • However, he also said that absent the Saudis' development and deployment of their spare production capacity, prices would be in the triple digits.
  • “We expect and demand that Saudi Arabia’s efforts be appreciated and acknowledged,” al-Falih said at an livestreamed energy conference there.

Go deeper: via Bloomberg, Veiled Saudi Threat Boosts Oil Prices Already Moving Toward $100

3. What they're saying: the Saudis and Trump

Let's spend another moment with the U.S.-Saudi tensions . . .

Be smart: In a weekend Forbes piece, energy analyst and Saudi expert Ellen Wald writes that the kingdom has only "limited" ability to respond to the United States.

  • She notes that the U.S. could make up for shortfalls of Saudi crude from other suppliers, while state oil company Aramco's U.S. operations would be hurt.
  • And to send the global price sharply higher, the Saudis would need to cut exports overall, which she calls "very unlikely" for their own business reasons — including Asian relationships — and the effect on the Saudi stock exchange.

Yes, but: The White House faces its own constraints, despite bipartisan pressure on Trump to take action over Khashoggi.

The rift comes as the administration is reimposing sanctions against Iran that are driving their exports downward, and Trump wants more barrels on the market from elsewhere in OPEC.

  • "If Saudi [Arabia] cut 1mbd out of the market right now, it could make Iran sanctions very, very expensive for the global economy," tweeted Sam Ori, executive director of the Energy Policy Institute at the University of Chicago.
  • That dynamic will enter into the calculus as the president considers his choices now," noted Ori (whose tweets are his personal opinions).

Correction: This story has been corrected to specify that Sam Ori is the executive director of the Energy Policy Institute at the University of Chicago, not the head of it.

4. The power shift in four nations
Expand chart
Data: IEA; Chart: Naema Ahmed/Axios

Amy and Axios data visualization whiz Naema Ahmed have a nifty item that explores the changing electricity mix in four key nations.

One cool thing: On Axios.com, you can hover over the Denmark graphic to pull up the same info for any other country.

Why it matters: A United Nations scientific body just released a seminal report on how the world’s energy systems would have to be transformed to adequately address climate change.

The big picture: The world is still heavily dependent upon fossil fuels. It accounts for 81% of the world's energy consumption, a figure that hasn’t changed in 30 years. Evolving electricity mixes is one clear gauge of how countries are doing cutting their greenhouse gas emissions and using cleaner technologies.

Details: Four countries — United States, Japan, China and Denmark — illustrate the challenges different parts of the world have in greening their electricity mixes.

  • The United States' emissions are at lows not seen in decades, thanks largely to cleaner-burning natural gas displacing the far dirtier coal, along with an increase in renewables.
  • Japan showed what happens a lot of carbon-free electricity goes away. After the country shut down its nuclear plants in response to the 2011 Fukushima disaster, its dependence on fossil fuels — especially natural gas — increased.
  • China is ground zero for all things energy and climate change given its population sizes and energy appetite. Its dependence on coal is huge, yet it’s also leading in developing renewable energy.
  • Denmark is a prime example of the potential for for wind energy, particularly offshore. The renewable energy provides nearly 50% of the country’s electricity, a huge growth just over the last couple of decades.

Go deeper.

5. No, Trump didn't really pivot on climate Sunday

President Trump remains sharply at odds with scientists on global warming, even if he no longer thinks the whole thing is a big lie.

Driving the news: In his "60 Minutes" interview that aired last night, Trump said he did not think climate change was a "hoax," which is a clear break from his past use of the term.

  • Trump then quickly said, "But I don't know that it's manmade."

That means he still flatly disagrees with the overwhelming consensus among scientists whose research shows that human-induced emissions have been the dominant cause of warming since the mid-20th century.

The bottom line: That ongoing rupture, and Trump's reiteration of his view that addressing climate will be an economic loser for the U.S., signals that a policy change isn't coming at the White House, which is scuttling a suite of Obama-era climate regulations and moving to abandon the Paris climate agreement.

6. Climate costs and energy transition

Illustration: Lazaro Gamio/Axios

Axios' Felix Salmon looks at the financial stakes of climate change . . .

There's $500 trillion of wealth on planet Earth, give or take: Maybe $230 trillion in land and property, $200 trillion in debt and $70 trillion in equity.

The big picture: All of that wealth comes, ultimately, from the planet, and the climate. Specifically, it has come from a stable climate. William Nordhaus points out in his 2013 book "The Climate Casino" that “the last 7,000 years have been the most stable climatic period in more than 100,000 years.”

The last 7,000 years have also seen the rise of civilization and the creation of that $500 trillion in wealth. This is not a coincidence.

  • Nordhaus won the Nobel Prize this week, in an announcement that coincided with the release of a hugely important UN Intergovernmental Panel on Climate Change report on what will happen to the world when it gets 1.5°C, or 2.7°F, warmer than preindustrial levels.

The bottom line: The report puts the cost of a 1.5°C increase at $54 trillion, in today's money. That number comes from research that also says that a 2.0°C increase will cause $69 trillion of damage, and a 3.7°C increase will cause a stunning $551 trillion in damage.

  • $551 trillion is more than all the wealth currently existing in the world, which gives an indication of just how much richer humanity could become if we don't first destroy our planet.

Go deeper: Felix has much more in the Axios stream.